Google fined billions for anti-competitive conduct

An abuse of market dominance has seen search giant Google fined €2.4 billion ($AU3.69bn) in one of the largest rulings to be handed down for an antitrust case.

The ruling was announced by the European Commission in Brussels and paves
the way for a litany of civil actions brought by businesses affected by
Google's anti-competitive practices.

Google was found to abuse its dominance as the most commonly used search
engine to gain an "illegal advantage" over its rivals, actively
prioritising the results of its Google Shopping service while demoting the
rankings of competitors.

Commissioner Margrethe Vestager acknowledged the contributions made by
Google's technology in handing down the decision, before reprimanding it
for breaking the law.

"What Google has done is illegal under EU antitrust rules," she says. "It
denied other companies the chance to compete on the merits and to innovate.

"And most importantly, it denied European consumers a genuine choice of
services and the full benefits of innovation."

The search giant has 90 days to end the conduct, otherwise Alphabet,
Google's parent company, will face fines as large as 5% of its average
daily worldwide turnover.

The ACCC is examining the decision to determine if it warrants any action locally.

Representatives of Google contacted by CHOICE would not reveal if the same
practices are currently used in Australia. Instead they provided a
statement from Kent Walker, Google's general counsel, claiming competitors
can pay to promote their services.

"When you shop online, you want to find the products you're looking for
quickly and easily. And advertisers want to promote those same products.
That's why Google shows shopping ads," he says.

"We respectfully disagree with the conclusions announced today. We will
review the Commission's decision in detail as we consider an appeal, and we
look forward to continuing to make our case."

The Australian Competition and Consumer Commission is examining the decision to determine if it warrants any action locally.

"[We are] following this matter very closely and will now examine the European Commission's decision in detail," a spokesperson told CHOICE.

"This will include consideration of the effect these practices have on Australian retailers and shoppers."

The €2.4bn ($AU3.69bn) fine is more than twice as large as the
previous record holder ruled in an antitrust case of this nature, and yet
it represents a fraction of Google's $US90bn ($AU118.6bn) turnover.

In calculating the cost of the fine, the European Commission evaluated the
value of the infringement upon the European Economic Area.

Google Shopping struggled to gain traction following its launch in 2004,
before the internet giant leveraged its search engine. Internal documents
obtained by the European Commission reveal, in 2006, when it was then named
"Froogle", that the company was aware of its poor performance, writing "Froogle
simply doesn't work".

Google is still being investigated by the European Commission for an abuse of dominance in two additional instances.

Traffic to the site increased dramatically after it engaged in practices
deemed anti-competitive in 2008. Promoting Google Shopping led to increases
of 45-fold in the UK, 35-fold in Germany, 19-fold in France, 29-fold in the
Netherlands, 17-fold in Spain and 14-fold in Italy.

Simultaneously demoting the search results of rivalling comparison
shopping sites led to a significant drop in their traffic, in some cases as
steep as 85% in the UK, 92% in Germany and 80% in France.

The Commission
acknowledged some of Google's rivals adapted and managed to recover some of
the traffic lost, but never in full.

Holding a company as large and sophisticated as Google accountable
illustrates the difficulties involved. Among a number of evidence gathering
methods – such as the obtaining of documents, conducting surveys, running
experiments, and more – was the analysis of "very significant quantities
of data".

Google is still being investigated by the European Commission for an abuse
of dominance in two additional instances. The first concerns the Android
operating system found on more than 85% of smartphones worldwide, according
to figures from IDC, due to a suspected stifling of "choice and innovation
in a range of mobile apps and services".

The second concerns Google's
advertising platform, known as AdSense, due to concerns Google prevented
third-party websites from sourcing search ads from Google's competitors.